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Los Angeles Wave - Student Loan Fight Heats Up as Congress Returns

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House Republican leaders returned to Capitol Hill Monday after a one-week break and immediately blamed Senate Democrats and the White House for a hike on interest rates for an estimated seven million students who plan to take out government-subsidized student loans this year.

"It's time for the president to lead and it's time for him to bring his Senate Democrat leaders together and develop a solution. The House has done its job. It's time for the Senate and the White House to do [their] job," House Speaker John Boehner said at a news conference on the steps of the Capitol surrounded by other House GOP leaders and college-age students.

"Right now, what they've done over there is worse for students than doing nothing at all. The legislation passed in the House would balance the budget on the backs of struggling students. Attempt to balance it at least," Reid said on the Senate floor.

Because Congress failed to reach agreement on legislation, interest rates on subsidized Stafford loans doubled on July 1 from 3.4 percent to 6.8 percent.

This summer's fight is similar to the one that took place last year when rates were about to double.

Congressional Republicans opposed Democratic bills to keep the rates at the 3.4 percent level, saying any new costs for government-backed loans had to be paid for with budget cuts in other programs.

But right before the deadline and in the midst of a presidential election, negotiators came up with a plan to offset costs for subsidizing the loans and extended the 3.4 percent rate to July 1, 2013.

This year, House GOP leaders wanted to head off the charge that they didn't have a plan. The Republican-controlled House passed a bill in May -- more than a month before the deadline -- that would revamp how interest on student loans is calculated.

Instead of another extension keeping the rate static the House bill pegged interest rates for government-backed student loans to the 10-year Treasury note plus another 2.5 percent. It passed on a largely party line vote, with just four Democrats backing it.

The House bill was similar to the approach in President Barack Obama's budget, which also tied the interest rates for student loans to the longer-term Treasury note.

A bipartisan group of senators introduced a compromise bill at the end of June that was close to the House passed bill, but Senate Democratic leaders have not embraced it because it doesn't include a cap for interest rates in the event that economic conditions change and interest rates spike.

Democratic Sen. Tom Harkin, who chairs the Senate panel on education, opposed that framework, and has been pushing a proposal to simply extend the 3.4 percent subsidized rate for student loans for another year.

The Senate was expected to vote on Wednesday whether to begin debate on a one-year extension of the 3.4 percent rate.

But Republicans, possibly backed by some Democrats, are expected to block that measure as they push for a broader fix.

As much as leaders on both sides of the aisle are ratcheting up their rhetoric and attempting to pin the blame for the interest rate hike on each other, the differences between the major proposals on student loan interest rates are not significant.

But it's unclear whether there will be any real effort to bridge those differences before the next congressional recess in August, when members will go home for a month and likely hear more frustrations from students about the inability of Congress to reach a deal.

"One week after student loan interest rates doubled, House Republicans continue to try to blame Democrats instead of seeking a fix that helps our nation's students," Bass said. "Working families and students need more than their plan to make college more expensive and place more student loan debt on the backs of future generations.

"America's students deserve better than another costly Republican-manufactured crisis. With record high student loan debt, it's time to put aside partisan politics and find a long-term solution that permanently keeps student loan interest rates low and makes college more affordable for everyone," she added.